Chapter 5
Gross Sales Revenues - Sales Discounts- Sales Returns = ??
Net Sales Revenue
A company that manages its inventory effectively will have a higher or lower turnover rate?
Higher
The cost to clear land to build a new building would be included in the land cost or building cost?
Land
A Cash Equivalent is a short term investment that has a maturity date less than ?? days
90 days
Why is using the Aging of Receivables method of estimating bad debt is more acturate?
The older the debt, the less likely to get paid
Which of the following is a contra-asset account that reduces the amount of Accounts Receivable?
Allowance for Uncollectible Accounts
How is Goods Available for Sale (GAFS) Calculated?
Beginning Inventory + Purchases = GAFS
Allocation of the cost of a tangible asset over its life is called
Depreciation
A recurring payment of the same amount at the same time interval is a called
Annuity
How long should Goodwill be amortized?
Never (goodwill is not amortized)
If a company receives $1200 on January 1, 2025 in advance for 24 months of services to be rendered, how much will be recognized as service revenue at the end of 2025?
$600 = ($1200/24 months) x 12 months
How is Cost of Goods Sold (COGS) Calculated?
Goods Available for Sale - Ending inventory = COGS
Allocation of the cost of an intangible asset is called what? and what method is used for the allocation?
Amortization
Straight-line
Proessor Widdig invests $1000 today in an account earning 6% and would like to know what the value will be in 5 years, which table will she use?
FV of $1
If an asset is sold for more than book value what will be recorded?
A Gain
A company that is more effectively collecting cash from customers for credit sales would most likely see an increase in which ratio?
Accounts Receivable Turnover Ratio
Freight charges paid for purchased inventory is recorded in what account?
Inventory (increases inventory)
When a company acquires another company for more than the fair value of the acquired company’s net assets, the purchasing company will record what type of asset?
Goodwill
The value today of receiving a series of equal payments in the future is known as
Present Value of an annuity
If a company is depreciating a work truck based on miles driven what depreciation method are they using?
Units of Production
On October 1, 2025, a company lends cash and accepts a $6,000 note receivable that charges 6% interest. The note is due in 6 months. How much interest revenue will the company report for 2025 related to the note?
$90 = (($6000x6%)/12 months) x 3 months
The terms 3/15,net 45 represents what?
3% discount if paid in 15 days
Net due in 45 days
Money spent on research and development should be capitalized or expensed?
Expensed
An investment that pays semi-annual interest will pay interest how many times per year?
2 times
This inventory cost method results in the highest cost of goods sold during a period of increasing prices
LIFO